Uniting the anti-Euro left and right

You were among the first European economists to highlight the damage caused by the euro and called for it to be disbanded. In one of your latest analyses, you wrote that it is the Euro’s demise is now inevitable. In your view, how long will it be before that happens and in which country this start?

It is important to distinguish two problems here. The first is the analysis of the economic situation the Euro has created and its consequences. We have seen that for almost 13 years that the Euro not only did not induce macroeconomic convergence but has instead exacerbated the differences. I have said this several times, and now, this position is a consensus among economists. We also see that the Euro is a huge drag on growth for the majority of countries that have adopted it, except, of course, Germany. Finally, we see that the Euro aggravates deficits, both internally and external deficits, and that leads to the growing debts of countries that entered into Economic and Monetary Union (EMU).

All this is copiously documented by many authors. I deduced that the Euro can not operate other than in a spiral of poverty for many countries, and so it is doomed. But here we have a second problem, the conditions that will end the Euro. These conditions could be a catastrophic crisis that kicks off in the bond market. For now, from this point of view, the situation is stabilized by the European Central Bank. But the credibility of the latter is reliant on the fact that it has not been tested. One day or the other markets will test the resolution of the ECB, and on that day Mr. Mario Draghi will find himself in great difficulties.

The conditions that determine the end of the euro are also the increasing political tensions the Euro
causes both between member countries of the EMU and within those countries where anti – European forces are now growing. They may at some point confront politicians with the need to dissolve the euro zone or leave the Euro. I personally overestimated the speed of financial developments on the basis of what we experienced in 2008-2009. But this does not alter the substantive analysis.

On your blog, you alluded to a possible return to European Monetary System (EMS) after a possible dissolution of the euro zone. What do you think is the best strategy to get out of the Euro for the countries of southern Europe?

A return to the EMS implies that each country regains its national currency . The question of strategy is central here. The southern European countries have the choice between taking a decision to leave in isolation or to demand the dissolution of the Eurozone. If some countries, such as Italy, France and Spain were to say during a ECOFIN meeting that they were ready to leave the Euro, but that it would be better to dissolve it, given the commitment of the Germans to the Deutsch Mark, the solution to dissolve the Single Currency would be quickly accepted.

It would be far better to do collectively, making it appear a “European” act. The end of the EMU does not mean the end of the European Union nor that of cooperation on monetary matters between the countries concerned. However, this solution is also less likely at present. A country exiting in isolation is now the most likely solution. This would lead eventually (probably 6 months ) to the collapse of the Euro zone. But the political context of this process would involve much more conflict.

What responsibility do the European socialist parties have in the current crisis and what political forces do you consider able to make a change?

The responsibility of European socialist parties is overwhelming. First, it is direct: these parties surrendered unconditionally to the demands of finance and capital, they have imposed on their populations unprecedented austerity policies and they therefore bear wide responsibility for the economic stagnation we see today. But there is also an indirect responsibility.

By claiming that there are no alternatives to austerity, and proclaiming the “dogma” of the Euro, waving hypothetical disasters in the case of an “exit” of the Euro, socialist parties built a political discourse that has blocked the situation and which is an integral part of the crisis. This is why there cannot be an exit from the crisis without the destruction of these parties, their internal breakdown, and significant political realignments. We are witnessing this in France and Greece.

Today, we must join both left and right forces that understand the danger of the Euro, not in one party, but in an alliance that will be capable of carrying out a policy of rupture.

You consider France as a country in Southern Europe or Northern Europe? Depending on its position, what are the risks your country faces in 2014 ?

For me, France is clearly a Southern European country. It is if you look at both structural and cyclical characteristics of the economy and compared to those of the Italian economy, for example. France is also culturally much closer to southern Europe than northern Europe.

Therefore, it is most exposed to the consequences of the austerity policies in Italy and Spain. While these three countries remain in the Eurozone they are doomed to be in fierce competition against each other. By contrast, once they have returned to their national currencies, they can find margin for manoeuvre.

Finally, how do you rate the vicissitudes of Italian politics since November 2011 when Mario Monti began to impose European austerity measures?

Mario Monti’s policy has been to try to get results in the short term without worrying about the long term. He blocked the payments due from the state to private companies, he allowed credit to collapse an investment to contract, which condemns the Italian economy in the medium term. This is the opposite of a policy of a so-called “expert.” The reputation he built as an “expert” [or technocrat] was completely usurped. He behaved like one of those minor politicians whose name disappears into the dustbin of history.

Translation by Revolting Europe of interview published in the blog “the Antidiplomatico “